Telecommunications giant Telstra has moved to rebuild its relations with the Federal Government by naming company insider David Thodey as the replacement for outgoing CEO Sol Trujillo.

This morning the telco also announced that Donald McGauchie is stepping down as chairman, a position he has held since 2004, a year before Mr Trujillo's appointment.

Relations between the Government and Telstra were notoriously volatile during the reign of Mr Trujillo and Mr McGauchie, most recently with the company's tough tactics during the national broadband network tender process.

Board director Catherine Livingstone will take Mr McGauchie's place.

Mr Thodey will take up his new job when Mr Trujillo steps down at the end of June.

Today he said he was looking forward to working with the Government.

"I think it's important to look forward because that's the most important thing we have to do now, we have take this company forward and we have to look at what we can do to really get a good outcome here," he said.

Communications Minister Senator Stephen Conroy says the Government looks forward to a positive and constructive relationship with Telstra in the months ahead.

Top executive

Mr Thodey has been a top executive with Telstra since 2001 and was widely tipped as a front runner along with Telstra's chief financial officer John Stanhope and Sensis chief Bruce Akehurst.

It is understood the Telstra board signed off on Mr Thodey's appointment yesterday.

Telstra's relations with the federal government hit a low when the company was frozen out of the selection process for the National Broadband Project.

Telecommunications analyst Ivor Ries of Baillieu Stockbroking has described Mr Thodey as an "evolution rather than revolution" candidate who will have a vastly different style to Sol Trujillo who leaves on 30 June.

"Mr Thodey is very well known in political circles as a conservative, restrained person, more of a diplomatic kind of a guy. You're certainly not going to see confrontations with governments," Mr Ries told AM.

"His biggest challenge is building bridges with the government and sorting out the broadband mess. That's obviously poleaxed the company's share price and wiped out quite a few billion of dollars of shareholder value."

Telstra shares closed yesterday at $3.33, well below a high of $4.86 set in May last year.